Funds see fall in assets under management

Majority of the mutual fund houses reported a fall in the average asset under management (AUM) in December, leading to a fall in industry's AUM by close to 3 per cent to Rs 7.789 lakh crore.

In November the mutual fund industry – comprising 37 mutual fund houses – had reported a growth in AUM by 5.9 per cent to Rs 8.075 lakh crore.

For December, only three mutual funds with AUM of Rs 3,000 crore in November were yet to report the previous month's assets.

The biggest drop of Rs 5,216 crore was seen in HDFC Mutual Fund, its AUM for December was Rs 97,184 crore as against Rs 1,02,400 crore in the previous month, monthly data provided by Association of Mutual Funds in India (AMFI) showed.

Reliance Mutual Fund, the country's top fund house in terms of AUM, also saw a drop in the assets to Rs 1,19,981 crore (Rs 1,22,252 crore).

However, a small number of fund houses registered increase in their AUM.

LIC Mutual Fund's AUM grew by Rs 2,779 crore to Rs 51,502 crore. Franklin Templeton Mutual Fund's asset grew by Rs 1,373 crore to Rs 31,962.11 crore, Benchmark Mutual Fund's asset grew by Rs 336 crore to Rs 2,008 crore, Canara Robeco's asset base grew by Rs 324 crore and Mirae Asset's fund grew by Rs 10.66 crore.

AUM of Benchmark Mutual Fund, which has quite a few index based exchange traded funds, and Gold Exchange Traded Fund went up by 20 per cent in December. “People are now finding index funds attractive and we have seen inflows in all our index funds including Gold ETF and S&P 500 index fund,” Mr Rajen Mehta, Executive Director, Benchmark Mutual Fund, said.

Industry's AUM under fund of funds (domestic) registered a rise by Rs 88.89 crore to Rs 1,042.67 crore.

Source: http://www.thehindubusinessline.com/2010/01/04/stories/2010010450770400.htm

Banks' investments in MFs decline

Mutual funds will soon have to learn to live without the comfort of huge pools of easy liquidity from banks. With RBI bearing down upon them, lenders have pulled out close to Rs 22,000 crore of funds invested in mutual funds until mid-December 2009. Bankers say withdrawals have continued into the second half, led by the demand for liquidity to meet growing credit demand.

Data released by RBI shows that banks’ investments in mutual funds have fallen by Rs 21,957 crore to Rs 147,279 crore as on December 18. This comes just a few days after RBI sought information on bank exposure to mutual funds.

The RBI had cracked the whip after it turned out that banks had continued to park money in mutual funds even after RBI governor D Subbarao had told bank chiefs to impose internal limits on their exposure to mutual funds as there was an element of circularity in these investments. What this means is that bank investments in mutual funds comes back to banks again in the form of investment in certificates of deposits or through lending under the Collatarised Borrowing and Lending Operations (CBLO).

RBI’s latest data shows that banks pulled money out of mutual funds and deployed them in other areas such as commercial papers, corporate bonds and the equity market. The exposure in these three segments rose to almost Rs 6,228 between November 6 (immediately after banks received a warning from RBI) and mid December.

In the same period, the bank’s exposure to the mutual fund industry fell Rs 13,500 crore. Part of the money withdrawn from fund houses was used to lend as credit rose sharply in the fortnight ending December 18.

Bankers are of the view that if demand for credit revives in the fourth quarter, they are likely to pull out more money invested in MFs. By mid-December 2009, credit rose Rs 20,000 crore, the highest in the last few fortnights.

Some state-owned banks have already introduced ceilings on such investments. Canara Bank has fixed a limit of Rs 6,000 crore, or 10 per cent of total investments while Oriental Bank of Commerce has fixed it at 10 per cent of investments, top officials in the two banks said. For Dena Bank and Indian Bank, the number stands at 15 per cent of the total investments. Officials in Bank of Baroda said they were considering linking the quantum of cap to total assets.

RBI governor had even termed banks investment in mutual funds as ‘circular trading’, whereby money that banks invested in mutual funds was finding its way back to banks. Bankers say in many cases, banks were seen investing in mutual funds which invested in the certificate of deposits issued by that bank. It is estimated that banks account for one-third investments made in liquid mutual fund schemes.

Meanwhile, RBI has sought more data average, lowest and the peak level exposure to mutual funds at various points of time. RBI has also wanted data on certificate of deposits (CD) issued by banks which are directly subscribed by mutual funds and money lent by banks to mutual funds, if any.

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/Banks-investments-in-MFs-decline/articleshow/5408272.cms

Regime change, in favour of retail investor

The Indian mutual fund industry, reeling under the pressure of global liquidity crunch, saw huge redemptions at the beginning of last year. But with the equity market improving, fund houses witnessed decent inflows. The total assets under management (AUM) for the mutual fund industry stood at over Rs 4.6 lakh crore in January 2008. That surged to over Rs 8 lakh crore in November 2008.

The market regulator, Sebi, too came out with streak of measures to empower investors. Simplified norms made it easier for retail investors to put money in mutual funds. In June 2009, Sebi announced the move to abolish the entry load from August 1, 2009. Independent financial advisors and distributors, integral parts of the Indian mutual fund industry, gradually stopped selling mutual funds and instead opted to sell insurance products, as their commission came down from 2.25% to just 1%.

Despite the ban on entry load, fund houses saw sustained inflows in income schemes as banks and corporate houses started to park their surplus money in mutual funds. Equity schemes, however, started witnessing huge inflows from August that continued till November last year. However, market players say the surge in the AUM of the mutual fund industry in the last few months was because of market appreciation and not due to fresh inflows from the retail investors.

The market regulator came out with another important announcement that there should be parity among all investors while paying the exit load. It was observed that fund houses were making a distinction among unit holders by charging differential exit loads based on the amount of subscription. This announcement also came as a breather for the retail investors as they will now be at par with other mutual fund investors, especially high net worth individuals.

To further facilitate retail investors and increase the reach of mutual funds across the country, Sebi declared that mutual fund schemes can be transacted through the stock exchange infrastructure. Both the exchanges—the NSE and the BSE—have started their platforms for buying and selling mutual fund units.

With improving economic conditions, coupled with encouraging performance of the markets and online platforms, distributors are now aggressively lining up various mutual fund products for 2010.

Source: http://www.financialexpress.com/news/Column---Regime-change--in-favour-of-retail-investor/562788/